She hand-picked a new management team and erased a $3 million deficit that accumulated before she came to The Sage Colleges.

The private, liberal arts school has increased enrollment by 18 percent in four years. And it’s coming off its best fundraising year ever in 2012, after generating $19 million from the two largest donations in the college’s history.

But it’s not enough.

Moody’s Investors Service issued a negative outlook for Sage this summer, and classified the school’s bond rating as junk.

Sage has too much debt, too little liquidity, and it’s too reliant on tuition, Moody’s says. This was the fourth consecutive year the credit ratings company issued a negative outlook for Sage.

The rating comes months after Moody’s issued, for the first time, a negative outlook for the entire higher education sector.

Uncertainty surrounding the future of higher education threatens a critical piece of the Capital Region economy. The area has 18 four-year colleges with an enrollment of 127,000 students.

Those colleges employ 14,400 people, including 8,600 faculty with median salaries of $75,600 a year.

What has been one of the most stable pieces of the Albany-area economy is in jeopardy now that economic and demographic forces are testing business models at schools both small and large.

Student debt exceeds the nation’s credit card debt. Household incomes are flat. And rising tuition costs are causing more families to shop for better value, and in some cases, cheaper price tags.

Those factors are on top of recent demographic shifts that make it harder for colleges to fill seats. There is a smaller pool of high school graduates. There are a growing number of cheaper online courses available in the market.

Among those facing the toughest test are the 251 liberal arts colleges across the United States. Colleges that fail to respond and change will pay a price.

“I don’t think everyone will be able to survive,” Scrimshaw said. “Closings have already happened. There will be more.”

It is a difficult acknowledgment for an academic who earned a liberal arts degree in Latin American studies and a liberal arts doctorate in medical anthropology, and has spent her entire academic career in liberal arts institutions.

“The American way of education has become very expensive,” said Scrimshaw. Since 2008, she has presided over Sage’s three schools, the all-women’s Russell Sage College in Troy, and the co-ed Sage College and a graduate school in Albany.

Unlike research universities that have access to grant money, many liberal arts colleges rely too heavily on tuition for revenue.

That problem is compounded by the fact that fewer students are enrolling in the arts and humanities as more sign up for the degrees most likely to lead to higher-paying jobs.

Liberal arts schools have experienced back-to-back years of declining enrollment. Many have tapped into their small endowments to offset tuition costs.

“Their challenges remain extremely high,” said Mary Kay Cooney, an analyst with Moody’s and co-author of the report on Sage. “They have thin liquidity and the competition is really intense for students, especially in the Northeast where enrollment will drop significantly.”

The number of high school graduates in the Northeast is expected to decline by 10 percent, or 65,000 students, by 2028.

Meanwhile, just 12 percent of the country’s 4,100 colleges and universities are financially stable enough to be considered safe.

That forecast underscores the urgent need for schools to change, something not easily accomplished in higher education.

“Education is the only industry that has avoided major overhauls over the last 20 years,” said Thomas Begley, dean of the Lally School of Management and Technology at Rensselaer Polytechnic Institute in Troy.

The old college model—large campuses, hundreds of faculty—is also under siege from the proliferation of online programs. Online education is growing beyond University of Phoenix and Excelsior College in Albany, which alone has 35,000 students.

Some of the most prestigious schools in the country are seeing the value in offering a cheaper education. Starting in January, Georgia Tech will offer an online master’s degree in computer science. The degree will cost $7,000, a fraction of the price of the elite college’s on-campus courses and the first such program of its kind for an elite institution.

Some schools have turned to faculty to develop new revenue streams. Others have tapped new markets to recruit students.

Father Kevin Mullen, president of Siena College in Loudonville, said the private Catholic school has had success recruiting in Baltimore and Washington, D.C. The college also is working with Catholic schools in Puerto Rico.

“It’s hand-to-hand combat out there in terms of enrollment. The last three years have been the toughest,” Mullen said.

Scrimshaw spent the past five years shaking up Sage’s decades-old business model. She invested in a marketing and branding campaign. She reduced expenses by developing a leaner list of courses.

Scrimshaw knows she must do more.

Sage, long known for producing teachers and educators, is building science, health sciences and interdisciplinary studies as the need for teachers wanes. The college will expand a new program at the school that allows students to save money by getting a bachelor’s in three years.

Sage’s marketing team is recruiting in other countries because more foreign students pay full tuition. And Scrimshaw is pushing to generate revenue through lease arrangements with private organizations.

She knows the future that confronts Sage and others if they do not develop a long-term strategy.

“How do we create a sustainable model?” Scrimshaw said. “That’s what keeps me up at night.”